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What's in the Offing for Arbor Realty (ABR) in Q3 Earnings?

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Arbor Realty Trust (ABR - Free Report) is scheduled to report third-quarter 2021 results on Oct 29, before market open. The company is expected to have witnessed year-over-year growth in net interest income, whereas its earnings are anticipated to have declined.

In the last reported quarter, the New York-headquartered real estate investment trust (REIT), which primarily focuses on originating and servicing loans for multi-family, single-family and other commercial real estate assets, posted distributable EPS of 45 cents, surpassing the Zacks consensus estimate by 25%. Its Agency business generated revenues of $91.2 million (excluding gains and losses on derivative instruments).

Over the trailing four quarters, Arbor Realty surpassed the Zacks Consensus Estimate on three occasions and missed in the other, the average negative surprise being 2.1%. The graph below depicts this surprise history:

Arbor Realty Trust Price and EPS Surprise


Arbor Realty Trust Price and EPS Surprise

Arbor Realty Trust price-eps-surprise | Arbor Realty Trust Quote

Factors at Play

In the third quarter, the company closed its third multifamily mortgage loan securitization totaling $535 million. Such new loan originations in the third quarter are expected to have expanded the company’s fee-based servicing portfolio, thereby, driving servicing revenues.

Arbor Realty’s diversified investment focus on commercial real estate debt investments, mortgage servicing, and commercial mortgage-backed securities is likely to have enabled it to generate stable income in the third quarter despite the changing economic environment.

Mortgage originations, both purchase and refinancing, continued to normalize in the third quarter. Mortgage revenues have been facing tough comps from the origination boom in 2020, which was driven by ultra-low mortgage rates.

In the quarter under review, mortgage rates increased sequentially. Mortgage origination activities are estimated to have decreased dramatically, with rising rates discouraging refinancing activity. Nonetheless, given the strong housing market conditions, homebuying activities continued in the quarter under review. Hence, purchase originations are likely to have offered some relief.

This is anticipated to have favorably impacted gains on sale margin and the company’s Agency origination business.

Arbor Realty’s loan portfolio has significant exposure to multifamily assets. For the U.S. apartment market, the third quarter appeared to have been robust this year, with renter demand continuing to surge significantly. Delinquencies, defaults, loan modifications and foreclosures are expected to have reduced in the third quarter, backed by improving consumer confidence and liquidity. This is expected to have supported the company’s performance in third-quarter 2021.

A relatively favorable prepayment scenario in the quarter is likely to have led to a rise in asset yields. This is anticipated to have boosted net interest income in the quarter. The Zacks Consensus Estimate for the company’s quarterly net interest income is pegged at $116.9 million, suggesting an improvement of 43.1% on a year-over-year basis.

Lastly, there has been a lack of any solid catalyst that could instill optimism prior to the third-quarter earnings release. The Zacks Consensus Estimate for quarterly earnings has been unchanged at 37 cents over the past month. It suggests a year-over-year decline of 26%.

Here is what our quantitative model predicts:

Arbor Realty does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Arbor Realty is 0.00%.

Zacks Rank: Arbor Realty currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a beat their upcoming release:

Ventas Inc. (VTR - Free Report) , scheduled to report quarterly numbers on Nov 5, currently has an Earnings ESP of +1.28% and a Zacks Rank of 3.

Blackstone Mortgage Trust, Inc. (BXMT - Free Report) , slated to release third-quarter earnings on Oct 27, has an Earnings ESP of +1.07% and a Zacks Rank of 2 (Buy) at present.

Public Storage (PSA - Free Report) , slated to announce third-quarter results on Nov 1, currently has an Earnings ESP of +0.69% and a Zacks Rank of 2.